What is Quick Commerce?

The world has witnessed many consumer-driven digital revolutions in the last decade. From E-commerce to Food-
tech and Ride-hailing to UPI, digital technologies have completely transformed how we interact with businesses for our day-to-day needs. Changing consumer dynamics, social and cultural realities, and a fast-changing, rapidly-moving world have led to the rise of a new kind of industry called Quick Commerce.

The tipping point for the growth of quick commerce came in the form of the Covid-19 pandemic. The supply chain disruption and the social distancing mandates by the government created a demand for micro to smaller quantities of groceries, stationaries, and medicines to be delivered to homes within 10-30 minutes. This unique business model combines the merit of a matured E-commerce industry and advancements in last-mile supply chain technology.

The Current Scenario

The growth of quick commerce is complemented by the pace at which new players and multi-million dollar investments in these firms. There have been several global companies that have forayed into the world of quick commerce like JOKR, Boxed, Go Cheetah, Gorillas, Swiggy Instamart, Zepto, and many others.

According to Statista, the global Quick Commerce industry is expected to grow to $6.4 Tn by 2024, with large metros and tier 1 cities driving demand on the back of mid-high-income households. The study also indicated that over 36%of online shoppers used quick commerce platforms.

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Challenges faced by Quick Commerce

Evolving from a self-service superstore like Walmart, Big Bazar, and one-to-two day delivery from online marketplaces like Amazon and Flipkart, retail commerce has entered into its third and most evolved generation of delivering items within 10-30 minutes at a nominal or no delivery charge. Such a business model has forced companies to rethink their supply chains by shifting from a centralized warehouse at the city's outskirts to several smaller warehouses(dark stores/ fulfillment centers) a few kilometers from the last mile delivery point. This infrastructure has a high possibility of stockouts and lost revenues due to supply chain inefficiencies. On the other hand, excess inventory can lead to wastage.

Following are the critical challenges faced by quick commerce companies:

Dense and complex dark store / micro fulfilment center network:  Quick commerce currently are operating anywhere from 50 - 500 dark stores/fulfilment centers. These centers need to be as close as possible to the customers to enable quick deliveries. As a result of this spread out network, there is a need to make optimal inventory decisions across several nodes in the supply chain which makes the problem of predicting demand and aligning supply across every SKU + dark store level combination increasingly hard.

Need to get the product assortment right: Unlike physical stores or eCommerce companies, quick commerce companies can not maintain an inventory of a wide product assortment. They have to determine the products that are high in demand for which the customers want a quick delivery. The main goal for a quick commerce company is to optimize working capital by keeping inventory costs as low as possible.

Keeping inventory dump and waste low is important: Quick commerce company is more likely to maintain an inventory of several products with a short shelf life as people owing to their busy lifestyle prefer to get delivered products like fresh produce, fruits, vegetables, dairy, seafood. It becomes increasingly difficult to optimize the inventory planning and right-size the safety levels over hundreds of dark stores. Predicting the demand on special occasions like holidays and festivals is also a critical challenge for quick commerce companies.

Have robust and reliable suppliers to ensure frequent replenishment: Customers shopping on quick commerce platforms tend to do so because of the convenience, quick service, and availability of the products. Also, owing to the category of the products, customers tend to shop from quick commerce companies more frequently when compared to an e-commerce store. Therefore it is essential to always maintain adequate inventory levels at all times by identifying reliable suppliers. it's important to make sure that demand is aligned well with robust and reliable vendors who can enable replenishment on short cycles.

Kronoscope - Fueling The Growth Of  Quick Commerce

Fountain9’s Kronoscope is one of the most advanced AI-driven Inventory Planning and Demand Sensing products for companies operating in the F&B, Retail and D2C businesses.  Let us know how Kronosope is helping Quick commerce.

Bottom-up approach towards demand sensing: Kronoscope is an extremely capable, cost-effective, and reliable solution for accurate Demand Sensing. It uses overall nine different signals like historical trends, seasonal effects, cyclicity to provide base-level demand predictions. The Baseline demand prediction is further factors in changes in pricing, promotional campaigns, and holidays or weather for a sharper, more accurate demand pattern. Kronoscope addresses the challenge of a complex network of dark stores by taking a bottom’s up approach towards demand sensing. Kronoscope provides demand prediction for every dark store and every SKU at every last mile(neighborhood) level.

Identifying the best SKU fit: Kronoscope’s control tower module has the capability of providing stockout predictions and inventory pileup predictions. Quick commerce companies can utilize these reports to optimize their SKU mix and right-size the inventory levels. If an SKU is appearing in either of these reports multiple times, this means that the  SKU is either moving too fast and appropriate inventory levels should be maintained, or the SKU not moving fast enough for a quick commerce business model and should be dropped altogether.

Utilization of waste data for better demand predictions:  As a result of their business model, quick commerce companies have the potential to generate a lot of supply chain data. The vast number of SKUs and dark stores pose a significant challenge in demand prediction. Quick commerce companies need a capable demand prediction and inventory management solution to tackle the problems of stockouts and inventory pileups and provide the optimal demand predictions. Kronoscope has the capability to utilize, historical waste data and future waste targets to make accurate demand predictions.

Simplifying Purchase & Replenishment Planning along with supplier scoring: Kronoscope, with its sophisticated AI engine, helps quick commerce companies by automatically creating dynamic purchase plans, factoring in dynamic lead times, fill rates, shelf life, current inventory levels, open orders, and dynamic safety stock levels. Dynamic safety levels are assigned based on the demand variability, service levels, plan coverage days, and supplier fill rates. Usually, a complex endeavor, purchase planning is simplified with Kronosope. Procurement teams can automated purchase operations in just a few clicks, enabling faster replenishment plans.  Moreover, Kronoscope’s supplier scoring mechanism can help procurement teams to choose the best vendor for a particular SKU in a particular region based on their lead time, fill rate, and prices. Thus, giving the extra insights while negotiating with the vendors.

Pricing & Promotions Planning:  Promotions planning is a challenging task, and owing to the sudden jump in demand, the planner faces many challenges while predicting demand accurately. Kronoscope’s unique capability to easily capture historical promotion data and future promotions calendars, identifying crossover impact of promotions on one product/category to other associated products/categories, and establishing a visual correlation between the impact of promotions and demand makes it an ideal demand planning platform for quick commerce companies.

Sales & Operations Planning: ‍Kronoscope allows demand planners to maintain adequate service levels by classifying the entire SKU group into ABC classifications per Pareto Analysis. Class A products bring in the majority of the revenue, and 95% of service levels are maintained. In Class B, the service level suggested by the system is 80%-90%, and for class C service level is 75%-80%.  Its dynamic demand sensing and inventory planning capability, allows companies to maintain flexibility in safety levels to manage cash flows and working capital. Kronoscope helps quick commerce companies to optimize their working capital and reduce the complexity of managing multiple inventories. It allows managers to identify the products likely to sell out and inventory levels in advance.

The consumer of today is time-starved. They are more spontaneous and are more value-seeking with higher disposable income. To cater to them, quick commerce companies will need to airtight their inventory planning processes with an AI-driven supply chain visibility platform like Kronoscope to reduce inventory management costs and improve working capital performance.

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